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Business confidence among Swiss SMEs remained strong during the first quarter. While industrial SMEs experienced a slight deterioration in fortunes, the situation improved for service providers, who managed to maintain the excellent business climate of the previous two quarters. However, Swiss SMEs still failed to gain any ground against large Swiss companies.

Since the third quarter of 2006, more than 40% of Swiss small- and medium-sized enterprises (SMEs) surveyed reported an increase in the number of new orders. Their performance was also ahead of expectations in the first quarter of 2008, when 46% of the SMEs surveyed reported an increase in new orders. Similarly good results were achieved in terms of total sales, although export sales were disappointing. Sales prices rose markedly. Business activity thus returned to its former high levels as work backlogs and the number of employees continued to grow. These are the results of the latest UBS quarterly survey involving 700 Swiss companies conducted as part of the UBS SME barometer in cooperation with the Swiss Industry and Trade Association.

Slower pace in the second quarter The respondents remained positive regarding the second quarter of 2008. However, expectations are lower compared to the results from the first quarter, as 31% of SMEs anticipate more new orders than last year. The proportion of companies with rising revenues has fallen for the last two quarters and this trend looks set to continue, judging by the expectations of the companies surveyed. Sales growth is also expected to slow during the second quarter. Despite this, over 40% of respondents expect sales prices to increase. Overall, expectations in the second quarter are better for the service SMEs than the industrials. While 44% of service providers expect an increase in orders placed, 55% anticipate higher turnover and 50% expect an improvement in the business climate. The corresponding figures for the industry sector are just 7%, 15% and 11%, respectively. In fact business activity for service SMEs in the second quarter should even be higher than for the large companies surveyed for benchmarking purposes.

No sign of a bank credit squeeze Swiss SMEs are satisfied with the credit available to them. The survey results do not indicate any negative influence resulting from the credit crisis that has affected the USA during the past few months, as 78% of SMEs surveyed and over 80% of large companies noticed no change in terms of credit available to them. Some 14% of SMEs even mentioned improved credit facilities and just 8% claimed conditions had tightened.

Swiss SMEs thus remain upbeat. Nevertheless, risks will remain in the medium term due to the recent rise in the value of the Swiss franc and the anticipated downturn in global demand.

UBS SME barometer

Notes: black bars = realized figures for the previous quarters; shaded bars = expectations for the current quarter; balance of the "gains" and "losses" reported (year-on-year) according to UBS survey: business climate = average of the balance of new orders and sales reported

The methodology used in determining the UBS SME barometer The UBS SME barometer is based on an evaluation of the UBS survey on manufacturing that has been carried out by the Bank since 1975 and which was extended from the third quarter of 2006 to include service providers. Around 700 companies (500 SMEs and 200 large companies), which form a representative cross-section of the Swiss economy, are surveyed every quarter. Any companies employing less than 250 people are classed as SMEs. The barometer reports the balances of the current and expected business climate, employment, sales prices and earnings of SMEs as a whole. These indicators are reported as weighted averages of the performance of each sector (manufacturing/services), with the weighting being based on contributions to value added in the overall economy by these sectors in 2005. The responses obtained from our survey are evaluated using a diffusion index: the balance for each indicator represents the difference between the percentages of companies reporting a positive or negative trend. It does not therefore represent a percentage rate of change. A comparison indicator has also been developed so that the barometer does not only provide information on the economic health of SMEs over the course of time, but is also able to allow a comparison to be made with large companies. It is defined as the balance of the SME business climate less the balance for large companies. Irrespective of the absolute economic situation, a rise indicates a relative improvement of SMEs in comparison with large companies, while a decline indicates the reverse.

Appendix: UBS SME barometer in figures

Contacts:

UBS AG

Daniel Kalt

Head Macro and Economics Research

Tel. +41-44-234 25 60

Carla Duss

Economic Research Switzerland

Tel. +41-44-234 21 19

Schweizerischer Gewerbeverband (SGV)

Dr. Rudolf Horber

SGV Political Secretary / Member of the SGV Executive Board

Tel. +41-31-380 14 34

Edgar R. Minder

SGV Press Officer

Tel. +41-31-380 14 41

The Schweizerische Gewerbeverband (SGV - Swiss Industry and Trade Association) is the umbrella organisation for small and medium-sized enterprises. It was founded in 1879 and is now the biggest business association in Switzerland. The SGV is active in representing the interests of some 300,000 small and medium-sized enterprises, most of which are members of approximately 250 industry and professional associations and of the cantonal industry and trade associations, which are organised on a multi-sectoral basis.